The Insider Game

he current crisis in American capitalism isn't just about the specific details —
about tricky accounting, stock options, loans to executives, and so on. It's about
the way the game has been rigged on behalf of insiders.

And the Bush administration is full of such insiders. That's why President Bush
cannot get away with merely rhetorical opposition to executive wrongdoers. To give
the most extreme example (so far), how can we take his moralizing seriously when
Thomas White — whose division of Enron generated $500 million in phony profits,
and who sold $12 million in stock just before the company collapsed — is still
secretary of the Army?

Yet everything Mr. Bush has said and done lately shows that he doesn't get it. Asked
about the Aloha Petroleum deal at his former company Harken Energy — in which
big profits were recorded on a sale that was paid for by the company itself, a
transaction that obviously had no meaning except as a way to inflate reported
earnings — he responded, "There was an honest difference of opinion. . . .
sometimes things aren't exactly black-and-white when it comes to accounting
procedures."

And he still opposes both reforms that would reduce the incentives for corporate
scams, such as requiring companies to count executive stock options against profits,
and reforms that would make it harder to carry out such scams, such as not allowing
accountants to take consulting fees from the same firms they audit.

The closest thing to a substantive proposal in Mr. Bush's tough-talking, nearly
content-free speech on Tuesday was his call for extra punishment for executives
convicted of fraud. But that's an empty threat. In reality, top executives rarely get
charged with crimes; not a single indictment has yet been brought in the Enron
affair, and even "Chainsaw Al" Dunlap, a serial book-cooker, faces only a civil suit.
And they almost never get convicted. Accounting issues are technical enough to
confuse many juries; expensive lawyers make the most of that confusion; and if all
else fails, big-name executives have friends in high places who protect them.

In this as in so much of the corporate governance issue, the current wave of scandal
is prefigured by President Bush's own history.

An aside: Some pundits have tried to dismiss questions about Mr. Bush's business
career as unfair — it was long ago, and hence irrelevant. Yet many of these same
pundits thought it was perfectly appropriate to spend seven years and $70 million
investigating a failed land deal that was even further in Bill Clinton's past. And if
they want something more recent, how about reporting on the story of Mr. Bush's
extraordinarily lucrative investment in the Texas Rangers, which became so
profitable because of a highly incestuous web of public policy and private deals? As
in the case of Harken, no hard work is necessary; Joe Conason laid it all out in
Harper's almost two years ago.

But the Harken story still has more to teach us, because the S.E.C. investigation into
Mr. Bush's stock sale is a perfect illustration of why his tough talk won't scare
well-connected malefactors.

Mr. Bush claims that he was "vetted" by the S.E.C. In fact, the agency's investigation
was peculiarly perfunctory. It somehow decided that Mr. Bush's perfectly timed stock
sale did not reflect inside information without interviewing him, or any other
members of Harken's board. Maybe top officials at the S.E.C. felt they already knew
enough about Mr. Bush: his father, the president, had appointed a good friend as
S.E.C. chairman. And the general counsel, who would normally make decisions about
legal action, had previously been George W. Bush's personal lawyer — he negotiated
the purchase of the Texas Rangers. I am not making this up.

Most corporate wrongdoers won't be quite as well connected as the young Mr. Bush;
but like him, they will expect, and probably receive, kid-glove treatment. In an
interesting parallel, today's S.E.C., which claims to be investigating the highly
questionable accounting at Halliburton that turned a loss into a reported profit, has
yet to interview the C.E.O. at the time — Dick Cheney.

The bottom line is that in the last week any hopes you might have had that Mr. Bush
would make a break from his past and champion desperately needed corporate
reform have been dashed. Mr. Bush is not a real reformer; he just plays one on TV.